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Rotation Into More Defensive Stocks and Sectors May be Imminent as Investors Favor Value vs Growth

Investor confidence in global economic growth remains high even as expectations of higher short-term rates increase, according to the BofA Merrill Lynch Fund Manager Survey for April.

The survey, taken between April 4 and April 10, 2014 with an overall total of 239 panelists with US$674 billion of assets under management, showed that the number of investors believing the global economy will grow over the next 12 months was steady at a bullish net 62 percent, unchanged from March and higher than the 56 percent in February. That view supports expectations for profits – a net 44 percent of investors believe profits will improve over the next 12 months, up from 40 percent in March and the same as in February.

However, expectations of higher short-term rates are growing with a net 66 percent believing short rates will rise over the next 12 months, up from 55 percent in both March and February and the highest in three years. This expectation of normalizing monetary policies, though, hasn’t changed sentiment on long-term rates much – a net 72 percent believes they’ll be higher in 12 months, down slightly from 74 percent in March and 73 percent in February. Taken together, expectations for a steeper yield curve are falling away. A net 22 percent of investors are expecting a steepening compared with 39 percent in March and 42 percent in February.

There was a big change in sentiment among investors when choosing between value and growth stocks. In April, a net 40 percent believed value stocks will outperform growth stocks over the next 12 months, more than triple the level in March and an all-time high.

The preference for value might offer one clue to the recent sell-off in technology and biotech stocks. “Recent market volatility has led investors to ‘taper’ their extreme bullishness on U.S. growth-plays and extreme bearishness on emerging markets,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.

Seeking alternative markets

Regionally, a net 66 percent of global fund managers believe the U.S. is still the most over-valued equity market, little changed from March and February. That has many looking again at emerging markets – a net 55 percent think these are undervalued, up from 49 percent in March and the highest reading ever. In addition, only a net 2 percent would like to underweight emerging markets, down sharply from 21 percent in March.

Crowded trades

Fund managers are taking a more guarded view of assets favored in recent years. Topping the list of crowded trades are Long U.S. High-Yield bonds at 22 percent, a notable jump on the 13 percent in March. Also, long peripheral debt was cited as a crowded trade by 19 percent of respondents, up from 16 percent in March.

“After two years of cyclical outperformance in Europe, some of the exuberance we see in investor sentiment and positioning suggests a rotation into more defensive stocks and sectors may be imminent,” said Obe Ejikeme, European Equity and Quantitative strategist.

Abenomics effect wanes

In Japan, the boost provided by the launch of “Abenomics” over a year ago continues to wane. Only a net 13 percent of investors are still overweight Japanese equities, down from 16 percent in March and 30 percent in February. Similarly, a net 16 percent have a favorable outlook for Japanese profits, down from 18 percent in March and 28 percent in February while perceptions of their quality and volatility turn for the worse.

What We Expected May Be What We Get

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Podríamos tener lo que esperábamos, a pesar de todo — Photo: Torsten Bolten, AFpix.de . What We Expected May Be What We Get

With the first quarter of 2014 behind us, let’s consider where we stand now versus our outlook at the beginning of the year, when we were favoring the US equity market over other equity markets. And our outlook for fixed income was based on a bias toward higher interest rates — not a dramatic hike in rates, but a downward drift in bond prices across the board. So we were favoring credit and shorter maturities.

Among US stocks, we liked the technology sector, where we noted some exuberant pricing but found that the broad swath of tech companies were not trading at bubbly prices — and after the recent market selloff that remains a truism.

My thoughts early this year were that low energy prices and labor costs would persist, keeping the US manufacturing sector competitive. On the corporate side, we would see more spending on capital, or capex, to replace some of the longest-lived assets in history. And on the household side, more jobs in manufacturing would drive pent-up demand for housing and automobiles, helping to revive the construction sector and fuel the economy in general.

Then what happened?

January came along, and we got some poor results from the consumer, with the first inklings that bad weather was at least partly to blame. Then in February there were heavier snowstorms and weaker numbers out of the consumer and factory sectors. While the market grew concerned when job gains seemed to decelerate and hours worked fell, many — but not most — technology stocks reached very heady valuations.

I want to stress that the private sector is still growing at 3.3% to 3.4%, and that’s what really matters to investors

How do things look now in April, as we enter the second quarter of 2014? The numbers from March are starting to come in. US labor markets continue to heal, with nonfarm payrolls again exhibiting modest expansion including upward revisions to January and February. More important, we saw an uptick in the workweek — a figure that I emphasize. So even though the pay rate received by workers has remained flat, which has favored corporate profits, the growth in jobs and the longer workweek bias the total wage bill toward better consumption going forward.

My conclusion? Even after last year’s nearly 30% gain in the S&P 500 Index and this year’s turmoil in the technology sector and the broader markets, the story of the durable US expansion remains intact.

The bigger picture

How do we measure the US economy against what’s occurring in the rest of the world? Let’s go through US trading partners. Number one by percentage of US GDP is the Eurozone, which on the whole is showing better and faster growth. This may not be a V-shaped recovery, but jobs, factory orders and fiscal responsibility all look to be improving in Europe. Another big trading partner is Mexico, and the numbers there remain solid.

Moving across the Pacific to Japan, we saw growth ticking up after the yen was devalued, although some indicators seem to be slowing down right now as the value-added tax is kicking in. I would say the outlook there is a little more uncertain.

China stands out among emerging markets for its major role in the global economy, but it accounts for only 7% of total US exports — and that share is declining. With exports contributing about 12% of the US economy, China directly influences only about 1% of US GDP. I don’t see any near-term excitement coming out of the numbers from China.

What matters on the investment side

We expect the equity market to focus on fundamentals, and earnings season for the first quarter has just begun. S&P profits expanded in the last quarter of 2013, and so did margins. Based on a broader number including privately held as well as publicly traded companies, the profit share of GDP — or the percent of the economy going to capital — actually rose again last year, despite the many predictions that it would have to revert back to the mean. This is really important because we haven’t seen a recession since World War II when the profit share of GDP was rising.

Looking at interest rates, which matter to all financial markets, we’re getting to see the new Federal Reserve chair in action. Janet Yellen seems to be accommodative, though with a view that the US central bank eventually has to step aside and let the market determine longer-term rates. So we continue to expect a slow drift higher in long- and medium-term rates, while short-term rates are likely to remain contained, since she apparently has no intention of raising the target federal funds rate as long as US inflation persists on the low side.

So to sum up, despite all the gloom sellers on the news during the long, dark winter, it appears that a lot of the slowing in the first quarter was temporary. And even though now, in the bright light of spring, we’re seeing a dramatic selloff, we think that US real GDP will continue to expand at around 2¼% — the same moderate pace we’ve been witnessing throughout this whole cycle. Finally, I want to stress that the private sector is still growing at 3.3% to 3.4%, and that’s what really matters to investors.

Post originally published in James Swanson’s blog “On the Lookout“. James Swanson is Chief Investment Strategist at MFS Investment Management

A Deep-Dive into the Markets of the Future and Opportunities in the Luxury Scene

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La llave de los mercados de lujo del futuro, de la mano de reconocidos líderes de la industria — Stella McCartney, Christian Louboutin and William P. Lauder, among the speakers. Photo: kentwang . A Deep-Dive into the Markets of the Future and Opportunities in the Luxury Scene

Now in its tenth year, the FT Business of Luxury Summit has become established as the premium thought leadership gathering for senior luxury executives, industry leaders, corporate decision makers and financiers from around the world.

Taking place in luxurious setting of the St. Regis Hotel in Mexico City, the 2014 Summit will take a deep-dive into the markets of the future, from the geographic to the virtual, and the value systems that make the difference.

The Summit will be lead by Lionel Barber, Financial Times’s Editor, and among the speakers will be the designer Stella McCartney (OBE); Bottega Veneta’s President and CEO Marco Bizzarri; Christian Louboutin’s Founder, Christian Louboutin; and Executive Chairman at Estée Lauder Companies, William P Lauder.

Other speakers will be Caroline Brown, President, Carolina Herrera; Jean Cassegrain, CEO, Longchamp; Roberto Stern, CEO & Creative Director, H.Stern; Andrew Keith, President, Lane Crawford and Joyce; Martin Wolf, CBE, Chief Economics Commentator, Financial Times; Yi Zhou, Multimedia artist, Art Director, tudou.com and Sina & Weibo ambassador.

This Summit will be a good opportunity to learn about 15 key markets of the future – both emerging geographical markets and virtual channels (social media, art, sport and sustainability) and discover how the world’s most prominent brands are looking to capitalise on them. Also, to gain incisive marketing intelligence from industry peers, participate in debates and hear the results of specially commissioned research. And to meet senior luxury executives from around the world at a series of networking functions incorporated into the programme, including a Welcome Reception at the exciting new Museo Jumex and a Gala Dinner at the spectacular Convento de San Hipólito.

Financial Times Business of Luxury Summit will take place on May 11, 12 and 13th. To see the programm follow this link.

TIAA-CREF to Purchase Nuveen Investments

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TIAA-CREF, a leading financial services provider, announced today an agreement to acquire Nuveen Investments, a diversified investment management company with approximately $221 billion in assets under management. The acquisition further strengthens TIAA-CREF as a leading provider of retirement and financial services and significantly expands the products and services available to help customers achieve financial well-being at all stages of their lives. Additionally, the transaction adds diversification to TIAA-CREF’s investment and distribution platform while bolstering its award-winning mutual fund offerings.

Nuveen, a trusted industry leader, will benefit from the enhanced resources, scale and strength that the transaction will add to its platform. Nuveen’s clients and the advisors and consultants who serve them will continue to benefit from the firm’s and its affiliates’ commitment to high quality performance, integrity and client service.

TIAA-CREF is acquiring Nuveen from an investor group led by Madison Dearborn Partners, a private equity investment firm, for an enterprise value of $6.25 billion, inclusive of Nuveen’s outstanding debt. Nuveen will operate as a separate subsidiary within TIAA-CREF’s Asset Management business, retaining its current multi-boutique business model and continuing to support its investment affiliates through scaled distribution, marketing and administrative services. John Amboian will remain the chief executive officer of Nuveen, and Nuveen’s current leadership and key investment team will stay in place.

The transaction enhances TIAA-CREF’s position as a world-class financial services organization with broad market presence. TIAA-CREF and Nuveen have highly complementary investment capabilities and distribution reach across a wide range of retail and institutional client segments. The addition of Nuveen brings TIAA-CREF’s total assets under management to approximately $800 billion.

“For nearly a hundred years, we have been wise financial stewards for those who make a difference in the world in the academic and non-profit communities,” said Roger W. Ferguson Jr., president and chief executive officer, TIAA-CREF. “The acquisition of Nuveen can generate greater returns that will benefit our customers. This transaction “reinforces our position as a leading diversified financial services organization with a broad mix of product offerings to serve clients today and those in retirement for decades to come.”

“We are pleased to bring our clients around the globe access to new investments and strategies through our partnership with an experienced, market-tested investment firm like Nuveen,” said Robert Leary, executive vice president, TIAA-CREF, and president, TIAA-CREF Asset Management. “In addition, Nuveen’s strong distribution network will give us growth and scaled presence in several important channels through relationships built around experienced investment managers with strong track records.”

“We are delighted to partner with TIAA-CREF, which stands among the most highly respected financial institutions and possesses an unparalleled pedigree in retirement services and investment management,” said John Amboian, chief executive officer, Nuveen Investments. “The clients of Nuveen, and each of our investment affiliates, will benefit from TIAA-CREF’s support of our multi-boutique approach and from the continuity of our client services, our brands and our professionals, whose interests will remain strongly aligned with our long-term success. Nuveen and TIAA-CREF share similar values and the same high standards of service and we are excited about the opportunity to further serve our clients.” Mr. Amboian continued: “The Nuveen team and I also would like to thank Madison Dearborn for their support and guidance in helping us advance our strategy and grow our business even in the midst of a very challenging and competitive market environment.”

“We are proud of the accomplishments Nuveen has made in recent years and its status as a provider of top performing investment funds,” said Sam Mencoff, co-chief executive officer, Madison Dearborn Partners. “TIAA-CREF is the right home for Nuveen and its investment affiliates moving forward. We thank John and his team for their partnership and we wish them well as Nuveen enters this exciting new chapter.

“The transaction will provide clients with additional investment choices and access to new products. Enhanced investment capabilities from the combination of TIAA-CREF and Nuveen will span both traditional and alternative investments comprising a diversified range of assets including equities, taxable and tax-exempt fixed income and credit strategies, commodities, real estate and real assets.

The transaction gives TIAA-CREF two award-winning mutual fund complexes with $181 billion of aggregate AUM. This year, for the second year in a row, TIAA-CREF was named by Lipper as the Best Overall Large Fund Company, a distinction separately awarded to Nuveen in 2012. Additionally, ninety-eight percent of TIAA-CREF’s mutual funds receive an overall Morningstar rating of three or more stars across all asset classes (As of March 31, 2014, 41% have 3 stars, 42% have 4 stars, and 15% have 5 stars). Ninety percent of Nuveen’s funds have an overall Morningstar rating of three or more stars across all asset classes as of March 31, 2014.

The boards of directors at both TIAA-CREF and Nuveen each have unanimously approved the transaction. The acquisition is expected to be complete by year-end 2014, subject to customary closing conditions.

Lazard acted as lead financial advisor to TIAA-CREF and J.P. Morgan Securities LLC also acted as financial advisor to TIAA-CREF. BofA Merrill Lynch, Wells Fargo Securities, LLC and Citigroup Global Markets acted as financial advisors to Nuveen Investments. UBS Investment Bank, Goldman Sachs & Co. and Moelis & Company acted as financial advisors to the Nuveen management team. Morgan Stanley, Deutsche Bank and RBC Capital Markets acted as financial advisors to Madison Dearborn Partners.

Roque Calleja Moves to BlackRock’s Mexico Office to Develop Relationships with Afores

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Roque Calleja has recently moved to BlackRock’s Mexico office as a Vice President, responsible for developing and maintaining relationships with institutional investors in Mexico and Central America.

In this role Mr. Calleja works with clients to provide insight about BlackRock’s active strategies and how these products can deliver desired investment outcomes.

Mr. Calleja’s joins BlackRock’s Mexico office from New York, where he supported BlackRock’s Latin America and Iberia business and was responsible for managing the retail offshore wealth business in the Northeast region, based in New York.

Mr. Calleja’s joined BlackRock in 2009 as a member of BlackRock’s iShares business in Iberia. Mr. Calleja earned a BA degree in business administration and a Master’s degree in Business Strategy from the Francisco de Vitoria university in Madrid, Spain. Mr. Calleja also holds a master’s degree in alternative investments and Hedge Funds by the Instituto de Estudios Bursatiles (IEB) university in Madrid.

Spring in Emerging Markets

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Emerging market (EM) equities and bonds have performed remarkably well in the past months. A lot of bad news seems priced in and with lower immediate risk, investors dare to step in again. In this enviroment, ING Investment Management have closed most of the underweight positions in EM but remain cautious for the medium to longer term.

In last week’s Marketexpress we wrote about the surprisingly resilient EM currencies. Despite the seemingly hawkish comments of Fed Chairwoman Yellen and the increasing worries about Chinese growth and its financial system, EM currencies as a whole have appreciated since the second half of March.

EM bonds and currencies perform well since end of January

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Policy response China after accumulation of bad news

The asset manager mentioned that one likely explanation for the EM resilience was that the reports from China had become so bad that markets interpreted them as good news: every disappointing figure was one step closer to a policy response. And indeed, last week the Chinese authorities announced a number of stimulus measures which are quite similar to the ‘mini stimulus’ package that was announced last year. The measures include accelerated spending on rail projects and public housing and extended tax relief for small businesses. Although the magnitude and effectiveness of the stimulus should not be overestimated, it should help to underpin the sentiment towards China and emerging markets.

A lot of negative news about EM is priced in

Next to that, after more than a year of strong capital outflows, markets have priced in a lot of negative news. The increasing evidence of financial system stress in China and the aggressive intervention of Russia in Ukraine have been important negative news items in the past months, but failed to push EM currencies significantly lower. This suggests that the downside risk for EM assets is lower than it has been for a while.

You can read the entire article on the attached document.

BNY Mellon Appointed as AIFMD Depositary by Dutch Pension Fund Administrator PGGM

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BNY Mellon, a global leader in investment management and investment services, has been appointed by PGGM Vermogensbeheer B.V., the investment management arm of Dutch pension fund administrator PGGM, to provide depositary services under the Alternative Investment Fund Managers Directive (AIFMD) for assets valued at EUR14 billion.

In addition to safekeeping the funds’ assets, which are held within five fixed income investment funds, BNY Mellon will provide oversight functions and perform cash monitoring as required by AIFMD.

Based in Zeist in the Netherlands, PGGM provides pension management, integrated asset management, management support and policy advice for pension funds. PGGM manages about EUR160 billion assets (as at March 2014) on behalf of more than 2.5 million Dutch participants.

Leonique van Houwelingen, Country Executive for the Netherlands at BNY Mellon, said: “BNY Mellon’s local presence and expertise in the Netherlands, our proven depositary and trust capabilities in Europe, and the flexibility we can offer were all key factors in PGGM’s decision to appoint us as their AIFMD depositary.

“We are well-placed to provide comprehensive support for our clients as they prepare for the far-reaching changes that AIFMD will bring. In addition to new requirements around reporting, operational, technology and control infrastructures, the Directive mandates the segregation of risk management and valuation functions from portfolio management. Through our fully licensed Amsterdam branch, we are able to provide comprehensive depositary bank services in The Netherlands to ensure compliance before the final deadlines of each respective regulation.”

Van Houwelingen added: “BNY Mellon has maintained a substantial operational presence in the Netherlands over the years. We are committed to leading the way when it comes to supporting Dutch fund managers impacted by AIFMD. The depository bank function is already a key element of our regional offering, and we have a well-established and robust track record in this space in Belgium, Germany, Ireland and Luxembourg.”

The new mandate extends BNY Mellon’s long-standing custodian relationship with PGGM. BNY Mellon currently services fund assets valued at EUR1 trillion and over 1,600 funds across the region.

Article 21 of AIFMD requires that an AIFM must ensure a single depositary is appointed for each alternative investment fund it manages. The depositary will handle the safekeeping of financial instruments and other assets; ensure proper and effective monitoring of the fund’s cash flows; carry out various monitoring and oversight tasks; and implement client reporting and escalation procedures to the manager and regulators in the event of breaches.

The Carlyle Group Names Jeff Holland Head of Private Client Group

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Global alternative asset manager The Carlyle Group has announced that Jeffrey C. Holland has joined the firm as Managing Director and Head of the Private Client Group. Mr. Holland comes to this newly-created position from Cole Real Estate Investments, Inc. where he was President and Chief Operating Officer, overseeing the Private Capital and Real Estate groups. Mr. Holland joined the firm on March 17^th and is based in New York.

Mr. Holland will oversee the group responsible for the development of Carlyle’s relationships with individual investors and intermediaries serving these investors. The group led by Mr. Holland will focus on arrangements with bank feeder funds and other financial advisors through which high net worth and other qualified individuals may gain access to an array of Carlyle alternative asset products. Mr. Holland will also be responsible for the development and marketing of additional registered and non-registered products that may become more broadly available, including hedge funds, credit-oriented funds and other trading strategies offered through Carlyle’s Global Market Strategies and Solutions business segments.

David M. Rubenstein, Co-Founder and Co-Chief Executive Officer, said, “Individual investors – private clients who have a broad range of investment capacity – seek the same access to our fund strategies that institutional clients have had for decades. Providing qualified individuals greater access to alternative assets and developing new products and platforms that are accessible to retail investors and mutual funds is a priority for Carlyle, and Jeff brings to this effort extensive experience in designing, developing and launching innovative products.”

Mr. Holland said, “This is a great opportunity to bring Carlyle’s institutional brand and record of excellence into the private client arena, through a variety of products, from retail mutual funds to private placements. I look forward to working with the Carlyle team to further build on their early successes.”

Prior to his work at Cole Real Estate Investments, Inc., Mr. Holland was a Managing Director and Chief Operating Officer for US Retail at BlackRock, Inc. Earlier he was a Vice President of Consulting Services at Raymond James & Associates and held positions with Capital Resource Advisors and McKinsey & Company Inc. Mr. Holland holds a Chartered Financial Analyst designation and is a member of the CFA Institute.

Mr. Holland, 42, earned his B.A. from the University of Puget Sound and his J.D. from Harvard Law School.

Euro-Zone Deflation: Making Sure ‘It’ Happens Here?

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Deflación: haciendo lo posible por que sí se instale aquí — Wikimedia CommonsPhoto: World Economic Forum. Euro-Zone Deflation: Making Sure ‘It’ Happens Here?

In one of his most famous speeches, recently retired Chairman of the US Federal Reserve, Ben Bernanke, set out how he would ensure deflation did not take hold in the US economy. The remarks to the National Economists Club in Washington DC were titled ‘Deflation: Making sure ‘it’ doesn’t happen here’.

The speech, which compared the remedy of sweeping tax cuts and open market purchases of assets to Milton Friedman’s helicopter drop of money, led him to be dubbed ‘Helicopter Ben’. The speech, which at the time was addressing the low rates of inflation in the US at the time, actually proved to be prescient and many of the policies set out were implemented in the aftermath of the global financial crisis.

Nearly twelve years after this landmark speech and five and half years after ‘Lehman Day’ is the European Central Bank (ECB) both ignoring Bernanke’s sage words and risking a debilitating debt deflation in the euro area?

Inflation in the euro zone is close to the bottom of the range of historic outcomes available from Eurostat. What then were the factors behind such a sharp and sudden change in euro-zone inflation relative to forecast just a few months previously? According to the report by Investec Asset Management, it is energy that has been driving inflation lower in recent months and, in particular, the base effect from 2012’s large increases, when energy prices were increasing at between 8% and 9%.

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However, this is not the entire story. When disaggregating the data into the underlying countries that make up the euro zone, it becomes immediately clear that the peripheral euro-zone countries are flirting with outright deflation, whereas the more solid core countries are comfortably within historical norms.

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This, of course, is a direct result of the structural adjustments the stressed euro-zone countries are undertaking without the traditional remedy of currency devaluation. This so-called internal devaluation has seen wages, consumption and government spending slashed. Ben Bernanke would not have been surprised by the flirtation with deflation in the periphery as he made clear in his 2002 speech: “deflation is in almost all cases a side effect of a collapse in aggregate demand – a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers.”

What would Dr Bernanke prescribe?

ECB President Draghi believes Europe will not slip into sustained deflation and has only adopted one of Bernanke’s five measures to avoid deflation.

In his 2002 speech, Bernanke noted that, in the first instance, it was necessary for central banks to preserve a buffer zone, which reduces the risk that “a large, unanticipated drop in aggregate demand will drive the economy far enough into deflationary territory.” There can be little doubt the euro-zone crisis qualifies as large and unanticipated and so it’s too late for buffer maintenance. The table sets out the ex-Chairman’s other recommendations and Investec’s view of whether or not they have been adopted by the ECB.

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Investec is concerned that the euro zone is in a fundamentally dis-inflationary environment. At present deflation is concentrated in a limited number of periphery euro-zone countries rather than the core. If it spreads, deflationary alarm bells will start to ring more loudly.

In this environment, Investec prefers German bunds and is underweight in Italy and Spain, and it has a preference for European equities over US equities on valuation grounds.

You may access the full report through this link.

Pension Systems from Mexico to Chile will Channel Greater Percentages of Assets Outside of Their Borders

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The Latin American pension system has grown to more than US$900 billion in assets under management, according to new research from global analytics firm Cerulli Associates.

“The pension industry in Latin America has been a key source of allocations for global managers and exchange-traded fund sponsors over the years, and promises to grow in importance as the size of these privatized social security systems quickly expand,” comments Nina Czarnowski, senior analyst at Cerulli. “Local capital markets will eventually be unable to absorb these additional flows.”

In their Latin American Distribution Dynamics 2013: Closed Markets Begin to Mature and Open report, Cerulli analyzes distribution and product development trends in the six key local mutual fund and pension fund markets–Brazil, Mexico, Chile, Colombia, Peru, and Argentina.

“Cross-border distribution to the regional pension industry remains the biggest opportunity. The good news is that, while highly competitive, it remains a fairly low-cost endeavor,” Czarnowski explains. “In fact, some of the top global managers in the region have succeeded in gaining more than US$5 billion each without a local office, or a local product.”

To the credit of the pension managers themselves, performance, global expertise, and on-going support have been the most-sought-after characteristics when choosing among cross-border managers.

“There has been a flurry of merger and acquisition activity in the pension space in Latin America, beginning in the last quarter of 2012,” Czarnowski continues.

Cerulli’s research finds that the compulsory fund systems from Mexico to Chile are doubling in size every five to six years. As they amass large sums of assets, it will be imperative for them to channel greater percentages of their assets outside of their borders.